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§ 18.4 CONTROL OVER FOREIGN DONEESfunds dispensed to these programs. Accordingly, it was held that contributions tothe organization were deductible as charitable gifts.In yet another illustration of this form of control and accountability, the IRSconsidered a domestic association that was organized for the relief of poor, distressed,and displaced persons of certain countries. This domestic associationwas incapable of listing in advance the names of the ultimate recipients of themonies it would turn over to a foreign organization. Even though the foreignorganization promised to use the funds for humanitarian purposes, such as furnishingfood, clothing, shelter, and medical supplies and services for distressedpersons, and even though both the foreign organization and its distributeeswere required to account for the use of the funds, there was too little discretionand control by the domestic organization to meet these standards. 30Conversely, a tax-exempt charitable organization does not jeopardize itsexemption by making controlled distributions assuredly in furtherance of its ownexempt purposes to organizations that are not themselves tax-exempt as charitableentities. “We do not believe this [tax-exempt] status of the distributees is arequirement for the distributor’s qualifications” as a charitable organization, thelawyers for the IRS observed. 31 They added: “It can be readily understood thatsuch status for the foreign distributee is a safeguard for insuring that charitablefunds will be expended solely in furtherance of charitable purposes.”In reaching its conclusion in this particular case, the IRS emphasized thatthe domestic organization did not know how the funds would be used. ThisIRS pronouncement further stated that it may not be necessary for a domesticcharitable organization to know in advance the precise nature of ultimate distributeesto ensure that its qualification as a charitable entity is not jeopardized,if it can establish that its methods of operation include the followingtypes of procedures:• The domestic charitable organization apprises its agents, at the outset, ofthe limitations imposed by U.S. law with respect to eligible recipients ofits funds, and makes clear to its agents that they are subject to the samelimitations in distributing its funds.• The domestic charitable organization reviews proposed projects in detail,and approves those reasonably calculated to accomplish one or more ofits qualified charitable objectives, before turning over any funds to itsagents for expenditure for these purposes.• The domestic charitable organization turns over funds to its agents onlyas needed for specific projects. This form of expenditure control encouragescompliance with the dictates of the domestic organization.• The domestic charitable organization, or an independent agent selectedby it for the purpose, makes periodic audits of programs and requiresperiodic financial statements by its agents. This continuing reviewassures that the charitable funds in question are not being misspent.30 Gen. Couns. Mem. 35319.31 Id. 555